Eyal R. D. Corp. v. Jewelex New York Ltd., Inc.
Filing
152
MEMORANDUM OPINION AND ORDER GRANTING MOTION TO DISMISS, For the foregoing reasons, Jewelex's motion is granted. As Eyal has thrice attempted to plead state-law claims, the dismissals are with prejudice. In No. 09 Civ. 4940, the Clerk shall term inate the motion (Doc. No. 26). The Clerk shall further docket this order in No. 07 Civ. 13. Consistent with my previous Order, litigation shall henceforth proceed only in No. 07 Civ. 13. The parties shall appear for their previously scheduled conference on June 3, 2011. (Signed by Judge Alvin K. Hellerstein on 5/4/11) (pl)
USDCSDNY
DOCUMENT
BLECfRONICALLY FILED
r't")C, #.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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)(
EYAL R.D. CORP.,
Plaintiff,
L~~ FI-LE-D:---';J~.P-rf-:t(j:--_----:",
MEMORANDUM OPINION
AND ORDER GRANTING
MOTION TO DISMISS
-against-
07 Civ. 13 (AKH)
JEWELEX NEW YORK LTD.,
Defendant.
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)(
ALVIN K. HELLERSTEIN, U.S.D.I:
Defendant Jewele}( New York Ltd. moves to dismiss all state-law claims alleged
in a Second Amended Complaint filed by PlaintiffEyal R.D. Corp., contending that the claims
either are preempted by the Copyright Act or that they fail to state a claim under Federal Rule of
Civil Procedure 12(b)(6). For the reasons that follow, Jewele}('s motion is granted.
The following substantive facts are taken from PlaintiffEyal's Second Amended
Complaint and from previous decisions in this case. Eyal is a small, family-owned New York
corporation that designs, manufactures, and sells jewelry. At issue in this case is one of its
jewelry designs, the "Prinuette Trade Dress," which was created by its founder, Albert Kallati.
The Prinuette Trade Dress consists of alternating princess cut and baguette cut diamonds set in
alternating fashion within a half-channel setting. Eyal has fashioned a line of jewelry based on
the Prinuette Trade Dress, which it has marketed, promoted and sold via its own website and
through the catalogue of the Jewelry retailer Fred Meyer.
In the Second Amended Complaint, Eyal alleges that "[d]ue to [its] e}(clusive and
widespread use of ... non-functional design features in connection with Jewelry, its Prinuette
Trade Dress in the Prinuette product line has acquired enormous value and recognition in the
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United States." Second Am. CompI. ~ 10. Further, "[s]uch trade dress is well known to the
consuming public and the trade as identifying and distinguishing [Eyal] as the exclusive and
unique source of the products that are used in connection with such trade dress." Id. According
to Eyal, lewelex is liable under state law because it "regularly produces, manufactures,
advertises, offers for sale and otherwise distributes, for commercial advantage and private
financial gain, rings ... by lewelex ... which use the Prinuette Trade Dress without permission,
and thus infringe upon [Eyal's] trade dress." Second. Am. Compi. ~ 11.
The Second Amended Complaint alleges five claims. In Count 1, Eyal alleges
without elaboration that lewelex is liable for unfair competition under New York common law.
In Count 2, Eyal alleges unjust enrichment, in that lewelex has profited unfairly from its
copying. In Count 3, Eyal alleges trade dress infringement under New York common law, in
that lewelex "has reproduced, copied and imitated the Prinuette Trade Dress in manufacturing
the lewelex Rings in a manner that is confusingly similar to the distinctive trade dress of Eyal."
Second Am. Compi. ~ 21. In Count 4, Eyal alleges that lewelex has "dilute[d] the distinctive
quality of [Eyal's] trade dress and all rights held thereunder," thereby causing injury to Eyal in
violation ofNew York General Business Law § 360-1 (McKinney 2011). And finally, in Count
5, Eyal alleges that lewelex has committed deceptive acts and practices in violation of New York
General Business Law § 349 (McKinney 20 11).
This case began in 2007 when Eyal filed No. 07 Civ. 13 in this Court, alleging a
claim of copyright infringement under the Copyright Act, 17 U.S.C. § 101 et seq.
Approximately two years later, Eyal filed a state-law complaint in Supreme Court, New York
County, which lewelex removed to this Court. That complaint, No. 09 Civ. 4940, was
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coordinated with No. 07 Civ. 13; at some point, Eyal amended No. 09 Civ. 4940. Later, I
ordered the two cases consolidated into the earlier filed case, No. 07 Civ. 13.
Early in this case, Jewelex moved for summary judgment to dismiss the copyright
claim, which Judge Haight, the first judge to preside over these cases, denied. After I took over
these cases, Jewelex again moved for summary judgment dismissing the copyright claim, and
also moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss the state-law claims in No.
09 Civ. 4940. After oral argument, and in a summary order, I denied Jewelex's renewed motion
for summary judgment and granted its motion to dismiss, without prejudice to repleading. Order
Denying Motion for Summary Judgment, Granting Judgment on the Pleadings, and Setting
Conference, Eya! R.D. Corp. v. Jewelex New York Ltd., Inc., 09 Civ. 4940 (Doc. No. 18)
(S.D.N.Y. Oct. 6,2010). On November 30,2010, Eyal filed its Second Amended Complaint,
and Jewelex now moves again to dismiss, arguing that the claims either are preempted by the
Copyright Act or that they fail to state a claim.
Federal Rule of Civil Procedure 12(b)(6) provides for dismissal upon a plaintiff s
"failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). To survive
a Rule 12(b)(6) motion to dismiss, a plaintiffs complaint must contain enough facts to state a
claim to relief that is plausible on its face. A complaint "has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). The standard
"demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. Mere
"labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not
do," nor will "naked assertion[s] devoid of further factual enhancement." Id. (alteration in
original) (internal quotations omitted).
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The Copyright Act preempts a state law claim that protects "legal or equitable
rights that are the equivalent to any of the exclusive rights within the general scope of copyright
as specified." 17 U.S.C. § 301. At first, federal preemption of state intellectual property laws
was broadly applied, completely prohibiting state protection against the copying of product
shapes or configurations. See Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964) (finding
federal patent law preempted state anti-copying law). Over the past decades, however, the
Supreme Court and the lower courts retreated from this broad application of federal preemption.
See 1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 7:56 (4th ed.). Under the
modern approach, courts in this Circuit determine whether the Copyright Act preempts a
state~
law claim by using the "extra element" test:
[iJf an "extra element" is required instead of or in addition to the
acts of reproduction, performance, distribution or display, in order
to constitute a state~created cause of action, then the right does not
lie "within the general scope of copyright," and there is no
preemption.
Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992) (internal quotation
omitted). The extra element must change the "nature of the action so that it is qualitatively
different from a copyright infringement claim." Id. (citation omitted) (emphasis in original).
However, "[a]n action will not be saved from preemption by elements such as awareness or
intent, which alter 'the action's scope but not its nature.'" Id. at 717.
i.
Count 1 is Dismissed
Eyal contends that Count 1 of the Second Amended Complaint, alleging unfair
competition under New York common law, is not preempted. In New York, "the essence of
unfair competition ... is the bad faith misappropriation of the labors and expenditures of
another, likely to cause confusion or to deceive purchasers as to the origin of the goods." Jeffrey
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Milstein v. Greger, Lawlor, Roth Inc., 58 F.3d 27,34-35 (2d Cir. 1995) (citations and internal
quotation marks omitted). To recover for unfair competition, "a plaintiff must show either actual
confusion in an action for damages or a likelihood of confusion for equitable relief," and must
show that there was bad faith. Id. In order to avoid preemption, that which is claimed to be
unfair competition must be something different from copying, or the fruits of copying, or the
intent or bad faith that can be inferred from the act of copying; if the harm arises from the simple
fact of copying, the claim falls within the Copyright Act and is preempted. Computer Assocs.,
982 F.2d at 717 (emphasis added) (collecting cases); see also Stadt v. Fox News Network LLC,
719 F. Supp. 2d 312,321-22 (S.D.N.Y. 2010).
Here, Eyal has pleaded-in a most conclusory fashion-that Jewelex's copying
has created "a likelihood of confusion between [Eyal's] jewelry and [Jewelex's] jewelry."
Second Am. Compi. 'il12. The alleged "likelihood of confusion," arises only from lewelex's
alleged copying, and thus is preempted. Computer Assocs., 982 F.2d at 717 ("[U]nfair
competition and misappropriation claims grounded solely in the copying of a plaintiffs protected
expression are preempted."). The complaint does not allege, for instance, the efforts of a
salesman or a company, by words or deeds, to deceive consumers into believing that accused
merchandise is something else, a claim that might not be preempted because it would involve
allegations beyond the scope of the Copyright Act. I See 1 MCCARlliV ON TRADEMARKS AND
UNFAIR COMPETITION § 6:15 (4th ed.); see Samara Bros., Inc. v. Wal-Mart Stores, 165 F.3d 120
J"The terms 'palming off' or 'passing off' ... refer to at least three different and distinct situations: (1) substitution
of one brand of goods when another brand is ordered; (2) trademark infringement where the infringer intentionally
meant to defraud and confuse buyers; and (3) trademark infringement where there is no proof of fraudulent intent,
but there is a likelihood of confusion of buyers." 4 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 25: 1
(4th ed.)
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(2d Cir. 1998) (finding "actual confusion" to constitute an extra element). As pleaded, however,
Eyal has simply attempted to dress up its claim that Jewelex has copied its design.
Eyal's unfair competition claim is also dismissed for failure to state a claim
because Eyal, in its complaint, did not allege any facts to support the claim that Jewelex's actions
were done in bad faith-again, apart from the copying itself-which is an element required to
show unfair competition under New York common law. Milstein, 58 F.3d at 34-35. Count 1 is
therefore dismissed.
ii.
Count 2 is Dismissed
Count 2 of the Second Amended Complaint, alleging a claim of unjust enrichment
under New York common law, is preempted by the Copyright Act. "The elements of an unjust
enrichment claim in New York are that (1) defendant was enriched, (2) at plaintiffs expense,
and (3) equity and good conscience militate against permitting defendant to retain what plaintiff
is seeking to recover." Briarpatch Ltd.. L.P. v. Phoenix Pictures, Inc., 373 F.3d 296,306 (2d Cir.
2004). Here, Eyal's claim, based on the financial injury caused by Jewelex in "distributing,
selling, promoting and/or otherwise exploiting the Eyal Ring, thereby reaping financial rewards
without having to pay the costs required to design and market the ring," falls squarely within the
ambit of § 106 of the Copyright Act, because it is simply alleging harms arising from Jewelex's
alleged copying of the Eyal ring. Id.; see also Stadt, 719 F. Supp. 2d at 321-22; Orange County
Choppers, Inc. v. Olaes Enterprises, Inc., 497 F. Supp.2d 541, 555-56 (S.D.N.Y. 2007).
iii.
Count 3 is Dismissed
Count 3 of the Second Amended Complaint alleges a claim of trade dress
infringement under New York common law. A product's trade dress is its "total image and
overall appearance ... as defined by its overall composition and design, including size, shape,
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color, texture and graphics." Milstein, 58 F.3d at 31 (citations omitted). In order to prevail in an
action for trade dress infringement in New York,2 a plaintiff must prove (I) that its trade dress is
distinctive or has acquired secondary meaning; and (2) that a likelihood of confusion exists
between its product and the defendant's product. Milstein, 58 F.3d at 31 (citing Two Pesos, Inc.
v. Taco Cabana, Inc., 505 U.S. 763, 769-70 (1992)) (quotation marks omitted). Additionally, a
plaintiff must establish that the trade dress is not functional. Id.
In some circumstances, the elements of "likelihood of confusion" and "secondary
meaning" are considered extra elements that extend beyond the Copyright Act. See Eliya, Inc. v.
Kohl's Dept. Stores, 06 Civ. 195,2006 WL 2645196, at *5 (S.D.N.Y. Sept. 13,2006); U-Neek,
Inc. v. Wal-Mart Stores, Inc., 147 F.Supp. 2d 158, 174 (S.D.N.Y. 2001). But here, any
likelihood of confusion or secondary meaning issues would derive solely from Jewelex's
copying of Eyal's design. In such a situation, where there is no allegation that Jewelex has
palmed off its own goods as Eyal' s, there is no basis to find a basis of trade dress infringement
independent from the claim alleged under the Copyright Act. See Sublime Prod., Inc. v. Gerber
Prod., Inc., 579 F. Supp. 248, 251 nA (S.D.N.Y. 1984); see also Gemveto Jewelry Co. v. Jeff
Cooper, Inc., 613 F. Supp. 1052, 1063-64 (S.D.N.Y. 1984) (Weinfeld, J.), vacated on other
grounds, 800 F.2d 256 (Fed Cir. 1986) (suggesting that where the claim is "predicated solely on
[defendant's] having copied plaintiffs jewelry designs," the claim could be preempted). As
pleaded, the claim flows only from Jewelex's alleged copying, and it is thus preempted.
Further, Eyal's Second Amended Complaint alleges no facts to support a
plausible inference that the Prinuette Trade Dress has acquired secondary meaning, or that it is
The analysis for trade dress infringement, under both the Lanham Act and New York State common law, is the
same. Sports Traveler, Inc. v. Advance Magazine Pubs. Inc., 25 F.Supp. 2d 154, 166-67 (S.D.N.Y. 1998).
2
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distinctive. Rather, Eyal has merely provided, in a most cursory way, "a formulaic recitation of
the elements of a cause of action," which is patently insufficient to support a claim. Iqbal, 129
S.Ct. at 1949.
iVa
Count 4 is Dismissed
Count 4, alleging dilution of the distinctive quality of Eyal's trade dress in
violation ofNew York General Business Law § 360-1, is preempted. This statute provides that a
"likelihood of ... dilution of the distinctive quality of a mark or trade name shall be a ground for
injunctive relief ... notwithstanding the absence of competition between the parties or the
absence of confusion as to the source of goods or services." N.Y. Gen. Bus. Law § 360-1. To
establish a dilution claim under section 360-1, a plaintiff must show "(1) that the trademark is
truly distinctive or has acquired secondary meaning, and (2) a likelihood of dilution either as a
result of 'blurring' or 'tamishment.",3 U-Neek, Inc. v. Wal-Mart Stores, Inc., 147 F.Supp. 2d
158, 175 (S.D.N.Y. 2001). Though generally speaking, a plaintiff may plead facts to make out
an independent claim under section 360-1, see Eliyah, 2006 WL 2645196, at *7, where a plaintiff
can only plead facts to allege harm from copying, a claim under section 360-1 should be
considered preempted. Count 4 is dismissed on that basis.
Further, Count 4 is dismissed for failure to state a claim. Eyal has alleged no facts
to support its allegation that "its Prinuette Trade Dress has acquired enormous value and
recognition in the United States" and that "[s]uch trade dress is well known to the consuming
3"Blurring occurs 'where the defendant uses or modifies the plaintiff's trademark to identify the defendant's goods
and services, raising the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff'S
product'" New York Stock Exchange, Inc. v. New York, New York Hotel. LLC, 293 F.3d 550,557 (2d Cir. 2002).
"Tarnishment occurs when a trademark is 'linked to products of shoddy quality, or is portrayed in an unwholesome
or unsavory context,' with the result that 'the public wiJI associate the lack of quality or lack of prestige in the
defendant's goods with the plaintiffs unrelated goods." ld. (citation omitted).
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public and the trade as identifying and distinguishing [Eyal] as the exclusive and unique source
of the products that are used in connection with such trade dress." Second Am. Compl. ~ 10.
This pleading, completely bereft of any factual allegations, is insufficient to state a plausible
claim to relief Iqbal, 129 S.Ct. at 1949.
v.
Count 5 is Dismissed
Count 5 alleges that Jewelex's actions "constituted deceptive acts and practices
directed at consumers in the conduct of their business," in violation of New York General
Business Law § 349. As applied to this case, the claim is preempted. Eyal, again, has alleged
harms arising only from Jewelex's alleged copying of its design, and thus asserts only a harm
squarely covered by federal copyright law. 4
Further, Count 5 is dismissed because Eyal has failed to state a claim. To
establish a prima/acie case for a claim of deceptive business practices under section 349, a
plaintiff must allege that: "(1) the defendant's deceptive acts were directed at consumers, (2) the
acts are misleading in a material way, and (3) the plaintiff has been injured as a result."
Maurizio v. Goldsmith, 230 F.3d 518,521 (2d Cir. 2000). "[T]he gravamen of the complaint
must be consumer injury or harm to the public interest." Securitron Magnalock Corp. v.
Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995) (internal quotation omitted). "Claims that arise out
of a trademark infringement action, and disputes between competitions where the core of the
claim is harm to another business as opposed to consumers, both constitute situations which
4 Contrary to
Eyal's contention, Samara Brothers, Inc. v. Wal-Mart Stores, Inc., 165 F.3d 120 (2d Cir. 1998), rev'd
in part, 529 U.S. 205 (2000), does not compel a different result. In that case, Wal-Mart supplied Samara Brothers's
designs to a contractor and had the contractor create clothing under a Wal-Mart label. The Second Circuit found
that under the facts of the case, Samara Brothers could make out a claim under section 349 that was not preempted
by copyright law. Id. at 131. Here, however, Eyal does not, and cannot, allege a harm from anything other than
Jewelex's alleged copying of the Prinuette Trade Dress.
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courts have found to reflect a public harm that is too insubstantial to satisfy the pleading
requirements of § 349." Gucci America, Inc. v. Duty Free Apparel, Ltd., 277 F. Supp.2d 269,
272-73 (S.D.N.Y. 2003) (collecting cases). Here, Eyal pleads only an injury to itself, and not to
the public harm. This claim is dismissed as insufficiently pleaded. Iqbal, 129 S.Ct. at 1949.
For the foregoing reasons, Jewelex's motion is granted. As Eyal has thrice
attempted to plead state-law claims, the dismissals are with prejudice. In No. 09 Civ. 4940, the
Clerk shall terminate the motion (Doc. No. 26). The Clerk shall further docket this order in No.
07 Civ. 13. Consistent with my previous Order, litigation shall henceforth proceed only in No.
07 Civ. 13. The parties shall appear for their previously scheduled conference on June 3,2011.
SO ORDERED.
Dated:
~~IN~
¥,
2011
May
New ~rk, New York
United States District Judge
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